Reflect on this breathtaking figure: Over $11 trillion has been erased from the nation’s stock market since mid-January of this year.
That massive rubout supposedly came just three days before President Donald Trump started his term and has not recovered as much since. More recently, U.S. stocks had their largest two-day loss, $6.6 trillion jointly on April 3 and April 4.
The damage has left stockholders, including Black investors, in a precarious position: What should they do as the market moves to bearish territory? Stocks surged on April 8 after Trump approved a 90-day pause on tariffs impacting most countries, per The Wall Street Journal.
However, stocks crashed again on April 10 after the White House disclosed the tariff on China is now 145%. There is uncertainty about how stocks will perform subsequently. The unrest is being fueled by fears of a potential global trade war, a possible U.S. recession, and other headwinds.
Rising Number of Blacks Investing in Stocks
BLACK ENTERPRISE connected via email with well-informed Black U.S. stock market experts to gain their take on the chaotic Wall Street activity. Roughly 40% of Black Americans owned stocks in 2022, up from nearly 32% in 2016, based on Federal Reserve data.
Motivation wise: Investors have many options to help navigate this stock market turbulence. That could include adjusting their asset allocation, investing in so-called recession-proof stocks, and connecting with a financial advisor to help safeguard retirement savings in market downturns.
A legendary investor among the nation’s top money managers, John W. Rogers Jr. stressed that one of the best ways to be successful is to be a long-term investor. He added history has proven that when you have storms that cause market volatility, eventually the storm passes
He is the founder, chairman, co-CEO, and chief investment officer at Ariel Investments. Started in 1983, Ariel is the nation’s first Black-owned mutual fund firm. Long part of the BE Asset Managers list, the company now has $12.9 billion in assets under management.
Rogers shared that Warren Buffet reminds us that the Dow Jones went from 66 to 11,000. Rogers noted we got past two World Wars in the last century, the Great Depression, many recessions, and a pandemic.
“Our capitalist democracy is the best system ever invented, and we’ll get back to normal,” he says. “We’ll get through this, and history shows that we solve our problems.”
Research a Company’s Fundamentals Before Investing In Its Stock
When looking for a stock that will be resilient during this time, Rogers says, “we want to make sure that they have the balance sheet to weather the storm and that’s really important.” His advice: Be sure the company has financial strength and can hold on until the sun comes out again.
He mentioned that his firm has been adding consumer discretionary companies to Ariel’s portfolio, including building positions in the cruise lines. He says those stocks have gotten hit hard in this environment, including companies like Norwegian Cruise Lines (NCLH).
He says Ariel also has been buying OneSpaWorld (OSW). The firm does all spa services on cruise ships and has a 90% market share. Part of Ariel’s strategy is buying undervalued stocks.
Chris Graham, chief investment officer at Nationwide Investment Management Group, shared what Black millennials, Gen Z, and Baby Boomers should be doing now or considering when it comes to investing in stocks or another asset class.
He suggests they stay calm and diversified. He says although the recent market swoon might feel uncomfortable, it is important to let market volatility settle. It’s crucial to recognize that market fluctuations are a natural part of the investment journey, he says, adding that having a diversified portfolio with a long-term horizon is essential for building wealth.
“Investors should resist the urge to make emotionally charged decisions and instead ensure their financial plan accurately reflects their risk tolerance.”
For newer investors who are unsure how to begin their investment journey, especially given the uncertain macro backdrop, Graham advises investors to consider developing a quality portfolio across all asset classes, including stocks, bonds, and alternative investments like real estate.
For investors who already have a portfolio allocation, if necessary, they should consider rebalancing their asset allocation framework if it drifts too far from their risk tolerance.“
Graham stresses that investors should remember that economic slowdowns are not unusual. They often occur every few years with growth scares, such as the current macro backdrop, causing 10% to 15% drawdowns for stocks.
“Diversifying investments across various asset classes not only mitigates the impact of volatility but also positions investors to capitalize on shifting market leadership.”
Kelly Johnson, a fixed income portfolio manager at Charles Schwab Investment Management, recommends concentrating on what you can control. You can’t control inflation or the stock market, but you can control saving as much as you can each month. He adds that you can prioritize paying down debt versus spending unnecessarily.
Further, Johnson says to consider establishing a financial plan using either software or a financial planner as “his will force you to set achievable goals and a path to growing wealth.”
Mutual Funds Can Compound Your Money and Bring Tax Benefits
On the 401(k) front, Johnson has advice for Black Americans with such a plan: invest enough to take advantage of the company match. Also, if you are not contributing the maximum allowed, then make sure to boost the contribution level each year to gradually reach the maximum to take full advantage of the benefit.
“Keep saving and investing to the extent possible in good times and in bad,” he says. “The consistency will have a powerful effect on your wealth over time.”
Rogers, also portfolio manager of Ariel’s flagship mutual fund, the Ariel Fund, says 401(k) plans are an important vehicle because you can compound your money and have it grow tax-free for a long time, from when you first get employed to when it’s time to retire.
Calling it a very tax-efficient way to build wealth. Rogers says, “It’s important that we as Black Americans sign up early for our 401(k)s, maximize our contributions, and be in it for the long run.”
The worst thing to do is to panic. “That’s what a lot of investors do,” he says. “They get nervous, and they bail out right at the worst time, right at the bottom. This is actually a time to lean in and take advantage of the companies that have gotten cheaper.”
Sharif Muhammad, a founding partner at JMG CPAs & Advisors LLC, says in the current market stock investors should remain disciplined to their risk-appropriate investment allocations.
Working with a Financial Advisor Could Prove Helpful
He says that means they should consider regularly rebalancing their portfolios so that when the market is bullish, they are reducing their risk exposure by selling excess gains and buying lower priced stocks when the market is down.
“Right now, people should take deep breaths and call their financial advisor if they are feeling overwhelmed and confused,” Muhammad says.
Muhammad is a board member of the Association of African American Financial Advisors, a national, member-based trade group of more than 3,000 Black financial advisors, financial planners, wealth managers, and affiliated professionals.
Black investors should review strategies tied to nearness to retirement. Economist William Michael Cunningham says it’s prudent for those nearing retirement to reassess their investment portfolio to ensure it aligns with their risk tolerance and retirement timeline. Other options: Consider reallocating assets to more conservative investments to save capital.
“Regardless of your retirement timeline, maintaining an emergency fund and staying informed about market developments are essential practices to ensure financial resilience,” Cunningham says.
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